Chapter #5

Product Differrentiation

Victorias Secret
Who is Victoria?
Retired fashion model Thinking about starting a new family Has an adventurous sexy side Loves good food, classical music and great wine Travels frequently, at home in New York, Paris, LA or London Fashion tastes are edgy but never to the extreme Sexy and alluring never cheap, trashy or vulgar Beautiful and sexy, knows it is her brains not her looks that have enabled her to succeed in life

Created a lifestyle

Product Differentiation
Its about perception Sam Adams Rolex vs Casio

Ways firms can differentiate their products

Directly on the attributes of its products or services, or
Product features Product complexity Timing of product introduction Location

Ways firms can differentiate their products

On relationships between itself and its customers, or
Product customization Consumer marketing Product reputation

Ways firms can differentiate their products

On linkages within or between firms
Linkages among functions within a firm Linkages with other firms Product Mix Distribution Channels Service and Suppor

Focusing on the attributes of a firms Product or Services

Product Features Product Complexity
Bic Mount Blanc Cross

Focusing on the attributes of a firms Product or Services

Timing of Product Introduction
First Mover

Location
Disney World

Focusing on the relationship between a firm and its Customer

Product Customization
Mountain Bikes vs Schwinn

Focusing on the relationship between a firm and its Customer

Consumer Marketing
Mountain Dew Pepsi CocaCola Fanta

Reputation
Positioning

Focusing on Links within and Between Firms

Links between functions
Effective multi-disciplinary teams

Links with other firms

NASCAR

Co-brand
Product placements

Focusing on Links within and Between Firms

Product Mix
Products or services are technologically linked Single set of customer purchases several of a firms products or services

Distribution Channels Service and Support

Product Differentiation and Environmental Threats

Entry Rivalry Substitutes Suppliers
Sugar

Buyers
Quasi-monopoly

Product Differentiation and Environmental Opportunities

Xerox & Paper

Ethical dilemma does a product do what it says it will?

Lose weight Hair loss

Product Differentiation and Sustained Competitive Advantage

Rare Bases Imitability
Inform competitors Product features

Substitutes for Product Differentiation

Many of the bases of product differentiation can be partial substitutes for each other Using other strategies

3M

Can Firms be both low cost and differentiated?

The argument for no
Stuck in the middle

Can Firms be both low cost and differentiated?

The argument for yes
Successful innovation leads to increased sales Increased sales leads to lower costs